Andrew: Coming up, are you wrestling with inner doubt? Watch this interview. Somewhere around the middle, today’s guest gets very open about his inner doubt, and what he did to overcome it. It just might help you when you go through that depression or that self-doubt spiral that, frankly we all as entrepreneurs, I think, go through. Also, if you build a marketplace you need both sides to come. You want the buyers and the sellers to both be there at the same time, and neither wants to be there unless the other is there. You know the headache. What do you do? How do you overcome it?
You are going to find out in this interview what today’s guest did. It might help you if you’re doing that, too. Finally, what happens if one of your employees turns on you and starts to write nasty things about you online? It has happened to people, of course. How would you overcome that? You can’t tell your employees to stop reading it. You can’t shut it down because it’s the Internet. What do you do? Listen to what today’s guest did. You are going to find that out, also, those three things and so much more, coming up in this interview.
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Hey there freedom fighters. My name is Andrew Warner. I’m the founder of mixergy.com, home of the ambitious up-start and the place where almost 900 entrepreneurs have come to slowly tell you their stories, walk you through what they did, teach you how they built their businesses so that you can learn from them and hopefully, after you build your successful company, come back here and share what you’ve learned with others. I’m seeing more and more entrepreneurs have done that. In this interview I want to find out the answer to this question. How did a talent agent, who booked jazz artists, launch and sell an online business? Panos Panay is the founder of Sonicbids, which connects musicians with the promoters who book them for gigs. He launched the company in 2001, and sold it in 2013 to Backstage. Panos, welcome.
Panos: Thank you. Glad to be here.
Andrew: When you were an agent, did musicians approach you a lot asking you to represent them?
Panos: Yes, I was a talent agent for almost seven years, and I would say almost daily we got bombarded with dozens of press kits, if not hundreds, over the course of a week from artists who wanted to get booked by us. Admittedly, as a musician myself, and as a music lover and as a guy who went to a music college, I found it awfully hard to be in a position where, unfortunately, we declined just about 100 percent of them. So it was a very common occurrence back in the late 90s.
Andrew: What were they looking for? What do musicians want agents for?
Panos: Ultimately, as a musician and as a creative person, you have one yearning. That is to have your music, the thing that you love, connect and resonate with an audience. I think people often mistake that the first intention of the average musician is to go there and make a bunch of money by playing music. I think their first motivation is, gee, I just created this thing, how do I go out there and connect with an audience and ultimately that will lead me to making a living out of doing what I love. So that was their primary motivation, and to be honest with you that’s still what the primary motivation of any creative person is, or any entrepreneur for that matter because ultimately entrepreneurs are creative people themselves.
Andrew: Who want an audience, also. So the idea I imagine is this, a musician says, ‘I love to do music. People really respond well to it when I play in front of them. I just don’t want to do the business part of things. I don’t want to have to look for gigs. I don’t want to have to find a record label. I don’t want to have to figure out what to charge. I need you, the agent, to do it. Is that essentially what they were saying?
Panos: Well, certainly back in the 90’s, yes. Today, I don’t feel you actually have that luxury of saying, “Well, gee, all I like to do is play music and I don’t really care about any of the marketing stuff or I don’t care about any of the social media stuff or I don’t care about being ultimately an entrepreneur.” But certainly in the late 90s when we were dealing with a very different music industry, a very different environment, a different way of making money by being a musician, to some degree I think a much more difficult environment as a musician to make a living doing what you love, that’s what they were looking for and that’s what they were hoping. I can sit and focus 100% on my music, and you, Mr. Agent, you, Mr. Record Label Executive, you, Mr. or Mrs. Lawyer, go ahead and take care of all of my business. I think that, frankly, that’s an attitude that’s almost as much of a relic of its time as other things that have given way to this new wave of social media and this new rise of a new class of artist that we at Sonicbids call an artistic middle class.
Andrew: And you guys help them and help this whole movement happen. Before we get in to what you did, you said you turned a lot of artists down, almost 100%. Why?
Panos: Well, we used to have this rather informal rule that unless somebody made $3000 a night we just couldn’t take them on as a customer. Somebody may say, “Gee, that’s kind of cruel.” Well, the truth is, as an agent and as a professional you make 10% as a commission from booking artists. Ironically the artists that make the least amount of money are the artists that tend to be the hardest people to book. It’s frankly a lot easier to book somebody for $30,000 or $50,000 or $100,000 a night than it is to book the artist who’s making $2000 or $3000 a night. If you do the math, that’s a $300 commission, and I can tell you that back then, and still today, that’s a whole lot of work for $300. And out of that $300 you have to pay all your bills – you have to pay phones; you have to pay your staff; you have to pay, back then, your shipping packages, your contracts and all that kind of stuff.
Andrew: Shipping packages because…? What were you shipping?
Panos: Back then you were shipping physical press kits. Press kits with CDs and actual glossy photos and paper biographies. It sounds like such a quaint thing in the year 2013, but back then it was the most frequent and common way of marketing musicians. I used to have a full-time assistant and that’s what this person did. After I got off the phone and after I got somebody all excited about a particular musical act, well, guess what, there was no website to go and send them to and there was no easy way for them to hear or sample the music or see what this person sounded like or even read as much as a review. I would actually have to go ahead and send them a physical press kit and I would literally do this every week, hundreds and hundreds and hundreds of times.
The cost to the agency, and frankly to the artists themselves, was just insane. Or to the record labels who used to have to press all these so- called promotional CDs. If you’re a person of a certain age, you probably remember going to a used record shop, finding a bunch of CDs that said ‘For Promo Use Only’ or that a hole pierced right through the CD box. Well, guess what? Those were actually promo CDs that were never meant to be sold anyway, but they were meant to be sent out by people like me to all the folks who were interested in booking them or spinning them on the radio.
What’s interesting is that after a while, after rejecting all these people, I started asking myself, well, gee, $3000 a night. All the people I went to college with — I went to Berkley College of Music to initially study to be a performing musician; I ended up switching to Music Business – but all those people, all my friends, nobody made $3000 a night. And all the clubs and the places that I went to enjoying music at, I was sure as hell they weren’t paying $3000 a night for those bands. So that sort of got me asking myself a very simple question: Where on earth is everybody else going other than coming to me?
Andrew: And your revelation was sending out these CDs that end up in used CD stores costs a lot of money, it’s inefficient, there’s a lot of leakage. And because of that you had a revelation for a new way of doing things. That’s what set you off on this journey. What was the initial vision that you had?
Panos: You know, Andrew, it’s funny. I remember travelling to Italy as a professional and visiting one of my fellow promoters, somebody who I’d talked to over the phone all the time. I go into his office… And it’s funny because actually it overlooked the Vatican – it was a pretty cool place. I walk into his office and there I see literally hundreds of the CDs that I sent him over the years just lying there. I thought, “Oh, my God! What a complete waste.”
That sort of planted a seed in me, but the vision for Sonicbids, I actually got it while reading a book. I remember exactly where I was. I was reading a book called ‘Blur’, and I was on a train going from Dobbs Ferry, New York, to Manhattan. Ironically, ten years later Dobbs Ferry became well known as the birthplace of Mark Zuckerberg, but that had nothing to do with it.
Unfortunately, the idea I came up with wasn’t Facebook, but that’s a different story. I remember reading this book and it talked about this brave, new world of how connectivity was going to change everything, of how the speed of conversation was going to change everything, of how these centralized online marketplaces would bring buyers and sellers of goods in a way that the physical world was just not able to do in that it would be able to bring these people together in a very cost-efficient way. That just gave me an epiphany. I thought what if I created an online marketplace of sorts, for lack of a better word, that brought together anybody who made music, regardless of the language they spoke, the passport they carried, the music they played or even the level of proficiency with, theoretically, anybody out there who was looking to book them?
When I was a talent agent I used to have this… I think what made me successful was not access, but persistence. I felt that there’s always a buyer out there for any band, regardless of who they are, regardless of how good they are. It’s just an issue of working hard enough to find them.
Andrew: And it’s inefficient to keep making phone calls, to keep hunting them down, to keep sending out CDs just to find that one needle in a haystack. And you said, “If maybe technology could simplify it, then we could create an efficient marketplace.”
Panos: That’s correct. I felt that the Internet, even back in the late 90s when I first got the idea for Sonicbids, I thought that it created and had this perfect environment to bridge those inefficiency and bring formerly disconnected people together. eBay at the time, as well as other so-called marketplaces, were proving that to be true. So the initial vision for Sonicbids, to some degree, a bit of a blend between a Monster.com and an eBay of sorts, but for people who were looking for gigs.
Andrew: And the book, of course, is ‘Blur’ by Stan Davis and Christopher Meyer. April, who pre-interviewed you, asked you what books you recommend and that’s one of them. We’ll get to the second one later in the interview. She also asked you in the pre-interview, “What’s the first step that you took?” And you said, “I tried to raise money.” How did that go for you?
Interviewee: Terribly. Thankfully. This was, again, spring of 2000. For those of us who’ve been around for a while, that was the end of the first wave of .com bubble. There are a whole lot of companies that people would not even recognize but were household names at the time, like the globe.com and a bunch of others like cosmo.com that was almost like a precursor to Netflix. It’s kind of funny how a lot of these ideas that actually ended up becoming very successful ten years later kind of imploded with the end of that first wave. But I remember going around to people with my business plan, knocking on a lot of doors, knocking a lot of VC doors, and I got rejection after rejection after rejection.
The attitude was certainly, “Gee, man, did you get the memo? Nobody’s really starting online businesses in April, May, June of 2000? Forget it. Why are you even bothering to do it?” But to be frank with you, that rejection fueled me, and to some degree prepared me – I hate to say it – for a lifetime of rejection. One of the often unsaid things about running a business is that you actually get rejected a lot more than you get accepted. That’s just part of life as an entrepreneur, but you just dust yourself off and try again, as the saying goes.
Andrew: Why did it fuel you? Why didn’t you say, “Hey, these guys aren’t buying it,” and get in your own head about it, and say, “Maybe it’s just me. I’m a failure. Maybe it’s me, I picked the wrong time.” We’re going to talk later on, I think in this interview, I hope, about the inner game of entrepreneurship. Maybe we can touch on it now. What was going on in your head, and then why didn’t you give up and give in to it?
Panos: To paraphrase The Blues Brothers, I had a vision from God, you know? I mean, it was one of those things. I tell people all the time that, when you have a concept of an idea that you want to pursue, you don’t do it because you think you’re going to become a millionaire or billionaire, or you don’t do it for any other reason other than you are just driven, singularly, by that belief that your idea, your vision, can make the world a teeny better than the one you’ve inherited.
I often call entrepreneurship as being very similar to falling in love. Like when you decide, or you get an idea, you have the same feeling as when you fall in love with somebody. You can’t sleep. You can’t eat, unless you’re with that person, or unless you’re pursuing that idea, you can’t rest. Very much like when you fall in love with somebody, generally most of your friends have something to say about it, and generally most of your family and friends are probably not that crazy about it, because that’s just people’s instincts. Maybe people are commitment averse, I’m not sure.
I didn’t give up because I was just powered and energized by what I felt was a very, very magnetic vision. I almost became a zealot, if you will.
Andrew: That’s a good way to put it. If you couldn’t raise money to build this business from investors, how did you get the funds to build the company?
Panos: I was in a fortunate position, to be young, but thankfully not foolish. I had saved enough of the money that I was making as a talent agent. I was in the fortunate spot of having a base salary and then earning commissions on top. For about a period of two years, I put all of my commissions away. I thought that would be a ticket to my “freedom.”
Initially, I used my own funds. I started the company with about $50,000 of my own money that I had saved. Then, gradually, I got commitments from friends of friends, as well as my own family. Frankly, when I started getting commitments from other people, and they weren’t for a lot of money, they were for $25,000, $50,000. You know me, when I say they weren’t for a lot of money, it’s a lot of money for anybody, even 13 years later, but certainly we’re not talking about the millions of dollars that a lot of modern Internet companies raise.
Andrew: And, the cost of doing business back then was a lot higher, because you didn’t have the infrastructure that we have today. There wasn’t cloud hosting of your video files or image files, which we do here at Mixergy.
Panos: It’s unreal, yeah. When you look back at that era, and the cost of launching an online business, and even when you look at my early expenses, most people in 2013 will laugh. There’s stuff that you can do today entirely for free, that would cost $10,000 or $20,000.
Andrew: For example?
Panos: Frankly, building even the most basic infrastructure of the web site, I think today you can actually get a lot of open source components to put that in place that back then I couldn’t find. To give you an example, I wasn’t able to launch a paid membership plan initially, even though it was always part of my business plan, because I didn’t have the money to put together the infrastructure to process payments. Now days, you can just slap a PayPal button on your web site…
Andrew: I did that within minutes.
Panos: There you go! Then you can start processing payments in seconds.
Andrew: Or stripe, which we now have. You did something that was advanced for the time. So much that you did was advanced, but one of the things that you did was, you found a development company in Bulgaria to build out your site.
Panos: That’s correct. Like many things that are called advanced ten, thirteen years later, it was just pure luck. I wish I could tell you that I just had some insight or that I was just that smart. I was looking for office space because after about a year of running the company out of my apartment, I got sick of not having a place to go to work. It’s amazing how that very basic thing that most people who have full time jobs hate – getting up in the morning, taking a shower, eating your breakfast, and going to work – that very basic routine makes you feel that you’re doing something that is real. Makes your company feel real. And the more real it is or the more real that it feels, the more real it becomes to you and the outside world. I think a lot of it is about your attitude towards your company.
So for me after a while, after working out of my house for a year, I just started yearning for interaction with the outside world. I started yearning of having a place to go to work. So I started looking for office space here in Boston’s South End, and in one of the office spaces that I looked at it was a sharing facility, and I came across this guy who was [??] “Hey, are you looking for developers?” I’m like, “Sure.” And he says, “Gee, we have this outsource development team in Bulgaria that costs $35 an hour.”
And I said, “Thirty-five bucks an hour! My God, most American developers charge me a hundred twenty-five bucks an hour. Bring them on. I knew nothing about developers. I knew nothing about languages. I knew nothing about architecture. All the kind of stuff that in 2013 I would agonize about, frankly. Oh, you know, like based on the language that I picked, would I be able to attract other developers. That’s the kind of stuff that goes through your head. I didn’t even think about.
I said, “Thirty-five bucks an hour sounds good to me.” And we came up with the scope of the very first project that they would do. You’ll laugh, but the way that we would work because they were seven hours ahead of us, I would actually email them and then hand draw stuff. I didn’t have a scanner, so I would fax them my… Nowadays I’m going to call them wireframes. Back then I don’t know what I would call them because I didn’t know what a wireframe was.
Panos: Sketches. I just had a vision what the site would look like and how people would interact with it. So I would write and draw them my sketches, send them over to them. They would code during their day which was mostly during our night. By the time I would come to work at 10:00 in the morning, it was already 5:00 p.m. there, so they had most of their workday done. I would review them, give them feedback, and then we would do it over and over and over again, and that’s how I launched the first website.
Andrew: Did you accept payment in the beginning?
Panos: [chuckles] Not for the first six months. And then after that, aha! PayPal came about. And I used PayPal as the first method of collecting payments. That was the first method for quite some time because no bank would give me a merchant account, believe it or not, because we weren’t selling physical goods. All the banks I would go to would not give me a merchant account, and they would not give me a line of credit because I wasn’t a “real business.” Because Internet in 2001 and 2002 was still very much in its early days.
Andrew: How did you decide what to charge for? You could have charged for posting, music. You could have charged…I mean you could have charged the musicians, you could have charged the promoters who were looking for musicians. You could have charged advertisers. How did you pick who to charge and what to charge for?
Panos: Well, I always felt that you charge the motivated party. And the motivated party to connect was the musician. And more importantly, I feel that who you charge is who you treat as your customer, is who you think of as your customer to some degree and who you devote most of your energy and most of your resources to. So from the beginning from the very first business plan and the very first concept that I had about Sonicbids, I always had the concept that our customer would be the artist, and that we would be charging a subscription fee for access to a network.
I did not charge the promoters because I felt that from the beginning the biggest challenge that I would have would be to attract as many promoters as possible. And certainly one of the reasons why I got rejected over and over again in the beginning by investors was because nobody believed that it would be possible to build a so called two-sided marketplace. And certainly without a doubt, even in 2013, I think it’s difficult to build a two-sided marketplace, but if you do succeed and if you are able to do it, then it’s actually very difficult to break. I think eBay is proving that, better than almost anybody else.
In terms of how much to charge them, to be frank with you, is a completely gut instinct. People ask me, did you do any case studies, did you have focus groups? I just thought that $50 a year sounded like an awfully good deal to be able to summon up and apply to as many things as you wanted to, and save all the money from sending out physical press kits. My pitch back then was, gee, if I save you from sending out four physical press kits with CDs, you make your money back. Back then, to go and press a CD easily cost you $5, $6, $7 a CD to actually manufacture. Forget postage. Forget glossy photos. Forget all that stuff.
Andrew: I see.
Panos: That value preposition really resonated for people.
Andrew: The challenge with the marketplace is that it’s hard to get artists if there aren’t promoters looking for artists on the platform. It’s hard to get promoters if there aren’t enough artists for them to search through and find the right one.
It seems to me that the way you overcame that was by saying to artists, even if there aren’t promoters on this network, you’re going to be reaching out to them. We’re going to make it easy for you to talk to the promoters that you’re already talking to.
Panos: Yeah, you know, that’s a good point. I think maybe the flip side of the coin, that it was really expensive to launch a web site was that competition was not as intense as it is today. So, I really had time to develop and refine the concept, and develop and refine the idea.
The value prop. to the artist was, hey, I mean, I was honest with people, I’m building this, I’m still going out there to get promoters, but there’s still value for you because you can come and create your electronic press kit. You can email it out to anybody that you’d like. So even if you can’t physically apply to anybody, you can actually email it to anybody that you want, and when they get it in an email it comes in a very cool HTML email, and your photos and music are already there.
For a lot of people back then, frankly that was a novelty. Even the concept of having what we call a WYSIWYG site, and just uploading your photos, and your music, and your videos, that was back in the day it just sounded like a pretty cool thing to do. You know what’s amazing? Even 13 years later, to this day, people tell me that the EPK design, which is largely unaltered, that is still very simplistic, and it’s still very useful, and it’s still just the easiest place on the net to go and find information about a band in a very quick way if you’re a professional.
So, the value proposition resonated for musicians, but then I focused entirely my marketing energy and time on getting in promoters. To be frank with you, I knew how to do that. I was an agent. That was my job to get promoters to be attracted to, whether it was one artist or 1,000, it didn’t really matter.
Andrew: Let me break that down, actually. I want to come back to promoters in a moment, but first you wanted to get the artist, because they were the ones who were paying. How did you get the artists on board? What did you try and what worked?
Panos: Initially, I went to a career fair at Berkley College of Music, which is where I launched the company on February 25, 2001. I auctioned off a guitar that I got from a company for free, called Mars Music, which I put up in exchange for a small tile ad on Sonicbids. I knew Andy Summers from the Police, because I was his agent, so I got him to sign the guitar. I put a little sign and I said, “Sign up with Sonicbids and you enter the chance of winning a guitar signed by Andy Summers.” I guess one of my lessons to any entrepreneur is leverage any resources you have. Barter anything you can.
That got about 300 people to sign up. At the time, we were still free, but again I had to have proof of concept. To be frank with you, the way that I attracted artists after that was by going to promoters and getting them to act as our ambassadors, our marketers. I knew the area that most artists flocked to were promoters. They would go to promoters and say, “I want to play here. I want to play your club. I want to play your festival.” So, I felt that if I signed up enough promoters and I’d get them to market Sonic Bids as a legitimate means of applying to their events, that would be the key to getting the most amount of artists, because I certainly didn’t have enough money to go and spend it on traditional marketing,
Andrew: Or buy enough guitars to keep giving them,
Panos: Oh, or buy enough guitars, and there was no Facebook to buy ads, and if I had the money, there was no Twitter, there was no social media, if you will, and there was no easy places to go and find musicians at the time, it wasn’t like there were all these lists or Myspaces or all these websites that sprung up later on. So, if I had the money, frankly, or if I’d had a lot of money, I would have probably blown it on ads on MTV, and full page ads in Billboard magazine, or full page color ads in the back of the NYTimes art section, because that would have been my misguided instinct in terms of how to find bands.
Andrew: I see. So, you went to the promoters, and you said, “Please, when people come to you and say that they want to play here, instead of asking them to send you their CDs and press kit, etc., send them to the site where they can create a page and send you their music and send you their music and send you their story. How did you get them to say yes to that? That’s a whole new process for them.
Panos: They had the same problem that I had as an agent. They would get bombarded with press kits, that most of them would end up at the back of their office credenza, or whatever, and they were just overwhelmed with having to go through them, and respond to a lot of them. So, either they got unlistened, or, you know, the second to worst thing to that was you actually had to go through all of them, open them up, put the CD, listen to it, and then hand write rejection letters to everybody. I mean, that was a nightmare. But if you think about it, every promoter, whether you’re a bar, whether you’re a festival, whether you’re a college, whether you’re a cruise ship, you depend on music, ultimately, to sell that end product, whether it’s called a ticket, whether it’s called a pint of beer, a glass of wine, a plate of food, it doesn’t matter.
Ultimately you’re depending on music, so, therefore, you have a need to go through all this stuff. I knew that they had a fairly acute paying [???] point. So when I went to them, I said, “Look, I will give you this platform for free, I’m not going to charge you, but in exchange, I want you to actively refer these people to Sonicbids. I’m not going to change your process, you can still get stuff through the mail, if you really love Sonicbids and you want to do it entirely online, awesome, I’ll give you a discount, for being “exclusive” with me, but I didn’t seek to change the way they did business as I sought to augment the way that they did business. And looking back, I feel that was instrumental, because changing people’s work flow, and changing people’s habits is very, very difficult. So, my flexibility I believe, in working with these promoters, and maybe the fact that I understood them, because I was a professional for six years prior to starting Sonicbids, that made a difference in terms of the eventual adoption of the platform.
Andrew: What did you do to make that process easy for them? I mean, now they’re getting bombarded with people, instead of in the mail, but with emails, and online media. What did you do to make it easy for them to look through the kit quickly, to listen to the music, and scan it fast?
Panos: First of all, I talked to a lot of them, and I understood the way that they were reviewing things. So, the EPK, or the electronic press kit, was designed with them in mind. Then every single one of these EPKs was standardized, and still is. So, the simplicity of the look and feel of it, the standardization of it, made it really easy for them to scan through hundreds, sometimes thousands of these, in order to find what they were looking for. And, also, I didn’t seek to recreate a lot of the stuff that they were used to doing. Their inbox in Sonicbids resembled a lot their e- mail inbox, the way that it was organized, the way that they were able to move submissions into different folders.
So, to some degree, I didn’t custom build it for any one promoter, but I do feel that it was a bespoke product for a community. I sought to understand the way they worked, and I tailored Sonicbids around the needs of their community by talking with them, and evolving it in real time. That made a difference, that I listened to them and that I was able to react fairly quickly and launch new features that appealed not to one, but to all of them. That was key early on. I would say that without a doubt, promoter adoption was the single most instrumental thing in Sonicbid’s eventual success.
Andrew: To this day, 43% of bands come through promoters.
Panos: That’s correct. To this day, almost one out of two bands that join Sonicbids come as a result of seeing the Sonicbids logo on a website somewhere that says , “If you want to apply to me, apply through Sonicbids.” I sought to emulate a tried-and-true strategy of either American Express or, nowadays, PayPal, or back in the day, dare I say, TicketMaster where – I saw Sonicbids as a currency, as a platform, as an equivalent to a passport, where the more people accepted it, the most users I would get to use it. Again, I was guided mostly by instinct rather than any theories.
Andrew: There’s so much I want to ask you about and so little time left. Let’s talk about – we talked about the idea, we talked about the success, but it’s not all so easy. In fact, April in the pre-interview asked you about your biggest challenge, and your answer to her was fighting the inner demons. What are the inner demons that we as entrepreneurs face? What did you face?
Panos: Well, you know I like the way you termed it earlier. Inner demons are [??]. When I was a kid I read this awesome book called “The Inner Game of Music.” It was written by the same guy that wrote “The Inner Game of Tennis,” I think. And, you know, the truth is that embarking on being an entrepreneur, I think, is the second craziest thing on the planet to embarking on being in a rock band. Everybody tends to look at you strangely, and be like, oh yeah. Tom has decided he wants to start this company, and they look at you as if you’ve developed a drug habit that at some point you’ll hopefully overcome. But it is not a common route, and you’re also at an age – I was 26, 27 – where a lot of your friends are getting regular jobs, they’re making good money, and you’re deciding to take a very different path. Inevitably you not only get questions from your friends and your family about why you’re doing this, but certainly you keep asking yourself the question, am I doing the right thing? Is it the right thing that I’m depriving myself from the stuff that’s becoming expected, if you will, of somebody that’s my age? What if I fail?
You have all these doubts circling in your mind. I think there’s is a misconception sometimes that entrepreneurs are these hyper-confident people that never have a doubt in their mind. They just have this vision, and there’s never a nanosecond where they question their own vision. They’re able somehow to convince everybody that their idea is going to be fruitful. But it’s not the case. You have some doubt. You have people who doubt you. You get rejection. You get setbacks. You get, sometimes, depressed by rejection. There were some times where I would just go home and feel like Willie Loman from “Death of a Salesman.”
Andrew: Trying to sell door-to-door virtually to promoters. So when you’re going through that period, and I know that feeling, I know my audience has had that feeling, maybe they’re going through it right now, I know that because I see the e-mails that we have privately. The big question is, how do you change? When your mind just keeps saying you’re making a mistake, you’re not going to make as much money as other people in your position are, you’re not going to go anywhere. You’re robbing yourself of opportunities. Why are you doing this? When your mind goes into that, what do you do to change it?
Panos: I did a few things. I kept writing down all the reasons that I was doing this, and I still have those lists. I remember having a column, and on one side I said here’s why I’m doing this, and on the other side I said here’s why I should quit. I always felt as long as the reasons why I’m doing it outweighed the reasons I should quit, I won’t quit. The other thing was reading. To this day I read a lot, and I read a lot of biographies about people who started businesses – not necessarily online businesses, as a matter of fact anything but online businesses. And you realize, and I realize, that a lot of my challenges were extremely common.
Almost anybody who’s launched a business, whether its Bill Gates, or Ted Turner, or Richard Branson, or Steve Jobs, or John Rockefeller, it doesn’t matter. Anybody who started a business, Sam Walton, you know, they were faced with similar setbacks; they were faced with similar challenges. They were faced with similar insecurities and doubts, as you are, and if there was any common trait among all these guys that I found, it is their rather Churchillian notion of just never giving up. Ever, ever, ever giving up. And to this day, people ask me, “Why do you think Sonicbids was successful?” you know, and I say, “Look, I’m not the smartest guy that I’ve ever met, I’m not the richest guy that I’ve ever met, I didn’t have any technical skills, I didn’t have the biggest team, I didn’t have, at the time, any venture backing or prestigious venture back, I didn’t have a bunch of stuff. But what I knew I had, and what I knew that I controlled, were two things: my own persistence and how hard I was willing to work. You know, and, look, I’m not going to tell you that in life that’s all you need, but, you know, it’s 90% if you ask me.
Andrew: Going back to the list that you made, it sounds like one list was a list of all the doubts, all the reasons why things weren’t going to work out. The other list was all the things that you wanted. You wanted this business to succeed; you believed that you could get artists to add on and so on. When you made that list, how did it feel?
Panos: Well, when I was writing this list, sometimes I was scared that my right hand column would outweigh my left hand, meaning the reasons why I should quit would outweigh the reasons why I should keep going on. Every time at the end, it just felt liberating. It felt reinforcing. And, you know, I was also in a very fortunate position to have a family that believed in me, to have friends that believed in me, and, sometimes it’s important that you focus not on your setbacks and failures, but you have to focus on the things that are working for you. It’s easy to miss those cues, because you’re so focused on what’s not working. And, I will always look, and as a person to this day, I will always look for that positive affirmation.
I think one of the important things of being an entrepreneur is that you just have to focus on those silver linings, you have to be an optimist by nature. You have to love people, by nature. That’s my belief. I think people who are negatives, and misanthropes, and are looking for things that are wrong in life, don’t start businesses. Because, at the end of the day, you know, yes, things are stacked against you, and you are working against the tide.
Andrew: I find that for entrepreneurs, myself included, that the list of reasons why things are not going to work out makes itself. It writes itself in my head as I start, it rights itself in my head whenever I have a phone call where I try to sell someone and I get rejected. In your case, that list might have been added to when you talked to investors or said this is a terrible idea. It kind of makes itself. The list of reasons why things are going to work out seems to take effort, which is why it feels to me like you had to sit down and write it. You see, you’re smiling, is that a smile of recognition?
Panos: Yes, absolutely. I think, you know, the reasons why you should quit are almost self-evident, as you said, that list writes itself very, very quickly. But I think that the process of reminding yourself why you’re doing this is extremely critical. I think that to start a business, if your motivation is just to go and make a bunch of money, my feeling is that you’ll end up giving up pretty soon, because there’s a lot of easier ways to make money in life, than just starting a new business. I don’t know if there’s easier, but there’s definitely surer ways of making money. You know, you get a job, sure as hell, a week or two weeks later, you’ll get a paycheck. You start a company, and they take, like with me, three and a half years before I got my first paycheck from my own company because I paid everybody else before I paid myself, you know, and even when I paid myself three and a half years later, it was for the grand salary of $25,000 a year. But, hey, you know, if you believe in something, that’s what you need to do.
Andrew: There’s one other challenge, and that is an employee, and this is a hard thing for me to even talk about, an employee wrote an anonymous blog. What was it about?
Panos: This was years later, after the company grew, and, you know, you realize that in spite of your best efforts and of all the thought that you put into creating a company culture, in spite of your desires to create a collaborative space, and I went as far as designing the space that we’re in, working with and architect to design a place that’s open, worrying about the chairs that people would sit in, worrying about the company benefits. I wanted them to have the best benefits in the world even for a small company. I was always very particular about the way that we, as a company treated the people that worked here.
From the very first day I wrote not just a business plan, but a culture plan for Sonicbids and what kind of culture I wanted to foster, what kind of people I wanted to hire. I even wrote a list of what we call “The 13 Good Rules of Sonicbids”, sort of this unofficial commandment list of how you should behave. But, unfortunately, as companies grow, it’s inevitable that some people just won’t like you, not because of who you are, but because of your title, because of your role. I had an employee at the time who started an anonymous blog that was basically a hate blog against me. It was the most bizarre feeling in the world. It made me question, and it put to test a lot of my own values that were very important to me. It makes you ask yourself questions such as, ‘If I’m going to get this, in spite of all this work that I’ve done to create such a collaborative environment, maybe I’m an idiot being so giving.’
Andrew: Why be so nice if you still get burned?
Panos: Absolutely. Then maybe I shouldn’t be so nice. It really put to test a lot of my basic values that I have as a human being. It was absolutely very hard for a period of a couple months to come to work every day and there was a new blog post about the events that happened the day before. Somebody being pretty malicious and it was becoming a very negative thing in the company. It was a very difficult time. It’s funny, when you start a business you think about all the different things that can happen to you from running out of cash, to not getting enough customers, to not launching the right product, to not marketing the right way, not hiring the right sales people, not giving people the right raises, not retaining the right people. One of the things you don’t ever plan for or think of is, ‘Gee, what it somebody that I employ starts a hate blog that’s beamed all over the web and becomes the focal point of the business for a couple of months?’
Andrew: Because people have to read it. They feel like, ‘am I in it?’ or ‘what kind of stuff am I going to read about other people, or about my boss who’s in there?’ And you can’t stop them from reading it. You can’t stop them from talking about it. If you start outlawing them from reading and talking about it, that’s going to be more trouble. So what do you do?
Panos: That’s exactly what I did not do. I did not outlaw, meaning I agree 100% with you. One of the interesting things about being an entrepreneur is that your values will be called into question. That’s why I think it’s very important that you have those values clarified, of what you believe in, who you are and what you stand for. So, I thought a lot during that time how I should react. I could have shut the blog down, I could have hired attorneys, I could have blocked the blog from being accessed from the within the website. All the things that maybe your initial response tells you to do. But instead I thought, I won’t do any of that. If people want to read it, it’s a free world or at least a free country and they should read it.
Instead I appealed to everybody’s common sense, which is, look, you’re here presumably because you love the company. You are able to make a living, and grow, and get opportunities, and get raises, and get promotions, and launch products that customers love, and come to work in a place that you love because of this company. If you continue to read this blog, which is completely up to you, you’re effectively becoming the fuel and an audience for somebody who clearly wants to destroy this company.
Andrew: But it feels like even that’s not going to work. People would still read it anyway. But you did something else. You took another direction. You started writing your own blog, didn’t you?
Panos: I did. I wrote my own blog. I addressed some of the issues that the person was bringing up. I’m a believer in communication, clarity, being direct, open and honest with people about your own failings too. I think, people respond to honesty and integrity. Ultimately, that was the route that I took, I started an internal blog. I had an external blog at the time and believe it or not, I didn’t address anything at the external blog about this. I did address a lot of stuff in the internal blog that I wrote for company employees, or “teammates” as we call them at Sonicbids. That made a difference because I was communicating with people. At the end of the day, I just had faith. I had faith in the people here, I had faith in the way that they would respond. In the end, they stopped reading it, which deprived these people, whoever they are, write these hateful things. What are they looking for? They’re looking for an audience, audiences are oxygen. If you deprive them from an audience, you deprive them from their oxygen and it gradually went away.
Andrew: Why did you decide to sell?
Panos: Why did I decide to sell.
Panos: It was many reasons, some of them very pragmatic, some of them going back to those basic values that I have. The pragmatic reasons were, A) I raised money from venture capitalists and at some point they need a return. We got an offer that enabled everybody to make a good return. The other pragmatic reason was my entire net worth as a human being and as a person, both me and my wife, who’s also worked here for ten years was wrapped into the company. If anything went wrong, we would have absolutely nothing. As you get older, that’s something that you realize, these are very pragmatic reasons.
My instinctive reasons for selling was that I believe, unless the company got access to a broader set of resources, maybe a larger organization, at some point it would have a hard time competing. I either had to go and raise a bunch of more money or if a good opportunity came about, I would have to merge the company with a larger entity. That’s why I decided to do that. It’s important that you maintain a combination of pragmatism and idealism when you’re running a business. I always called myself a “pragmatic idealist.” You need your pragmatism to keep you sane, to make solid decisions.
You need your idealism to keep you going even when things are stacked against you. You need your idealism to keep you going in order to create something new, different, and that moves the needle forward. It’s this balance between the two that I think makes companies successful. If you overfeed your idealist side, you tend to go haywire. If you overfeed your pragmatic side, you tend to go out of business because you’re never focused on growth, or you don’t seize opportunities like selling the business or raising money when the right opportunity comes up because you’re too trapped in your particular identity of who you are, what you do, and why you do what you do.
Andrew: I’m reading online right here that you raised 4.5 million dollars, is that right?
Panos: I raised 4.5 million dollars in 2007. That was almost six years after I launched the company.
Andrew: From Edison Ventures, I think.
Panos: That’s correct.
Andrew: You sold the company for 15 million?
Panos: That’s also correct, published reports say.
Andrew: It’s correct, isn’t it?
Panos: It’s correct, yes.
Andrew: It’s the correct amount or the correct amount that people reported?
Panos: I said what they reported is correct.
Andrew: I see, OK. Most companies don’t reveal that, I’m surprised that that information is public for you.
Panos: It was a choice me and my buyer at the time made. I didn’t have an issue with that number being out there.
Andrew: Did you become a millionaire?
Panos: You could say so.
Andrew: How did your life personally change after this? We know how the business changed, a little bit of it, it hasn’t been that long. Backstage, a well-known company used to publish those. ndrew: So, but how did your life personally change?
Panos: Maybe I’m even more careful about money than ever before.
Panos: Because, you know, I guess a few things, you know. You realize that that’s not the reason why you started business, number one. Number two, I don’t know. You realize how hard you worked for that money. You’re protective, it’s an important thing. I mean, no, I didn’t go out there and by a Porsche, or a second home, or all that crazy stuff that people do. You know, I’ve always believed that money is freedom, hopefully freedom to do something that you like, and not to be enslaved by it. So, if nothing else, actually, I mean, my wife, Kimberly, who works here, we just made a conscious decision that if nothing else, we wouldn’t do anything dramatic.
You know what, maybe it was a lesson that I’ve learned as an entrepreneur, as one of the most common mistakes you make as a business, which, I certainly made as well, was when you raise money, and you come across a lot of money, you tend to overspend, you tend to throw your own instincts out the window about the way that you should behave, and you spend money on things you shouldn’t be. And you know, at some point, if you continue that, you run into trouble. As a human being, I don’t want to experience that. I work too damn hard in my life that I don’t want to go back to that level of insecurity that I had when I started the company, and, you know, maybe that’s a good enough reason for me to just not go bananas.
Andrew: It’s a great reason. All right, let me do a quick plug here, and then I want to ask you about your book recommendations, and the plug is for Mixergy Premium. You guys know that in the interviews on Mixergy, you hear stories of entrepreneurs who tell you how they built their businesses. As a premier member, you get all that, and in addition to it, you have, at this point, about a hundred courses taught by real entrepreneurs who break down what they do especially well. One of the courses that’s coming up is a course with the cofounder of Buffer. Buffer makes an app that makes it easy for people to send their stuff socially, send it to Twitter, to Facebook, etc. They got to over $100,000 in sales, I asked them how they did it, and Leo told me, “You know, content marketing.”
So I invited him here to talk about how he did content marketing, he broke down his process of how he wrote these articles, how he got the articles out online on popular sites, how he got those popular sites to say yes, how he then got customers from those sites to come to his site, to register for his product, to become his customers, and to grow his business. That’s just one of, as I said, about a hundred courses taught by real entrepreneurs who really went through what you’re going through now, and come here to teach how they did it. They just break down their process, and teach it so that you can learn from them. And it’s all available at Mixergypremium.com, and I guarantee you’ll love it. So, since I’m recommending at this point, why don’t we talk about the second book that you recommend. You love biographies, and it’s a biography of John D. Rockefeller. I was trying to jog your memory.
Panos: That is correct.
Andrew: Which one, and why do you recommend it?
Panos: It’s a book called “Titan” that was written by a guy called Ron Chernow, that I read in the late 90s. It’s long; it’s about 800 pages, so you have to have a lot of patience to get through it. It’s just an amazing story. It’s a story about a person that everybody thinks they know but they really don’t know, it’s a story about somebody who came from the humblest beginnings, built a giant empire, and the process changed the way that the world operated, that the country operated, became the richest man on the planet, and even by today’s dollars, he would have been the richest man on the planet, far surpassing Warren Buffet and Bill Gates and all the other guys.
This was a person that was driven by their values, he attended church every week, never drank, was a very charitable individual, contributed the money that started everything from the University of Chicago to, of course, a lot of the well-known New York establishments like the MoMA, and the Rockefeller Center, all the way to financing the education for Helen Keller, that a lot of people don’t even know about. As a matter of fact, she did not know about, and was a vocal critic of John Rockefeller until he died.
Andrew: While he was giving money to help her out, she didn’t know that he was the one who was helping her out.
Panos: That is correct.
Andrew: I’ve always been inspired by philanthropists. I’ve always been inspired by people who give.
Panos: I’m sorry to interrupt, but you were saying earlier that you read a lot of biographies. And this is a great example of one, “Titan: The Life of John D. Rockefeller, Sr.” But you also said “Certainly not Internet.” Why not Internet?
Andrew: Because, you know, I believe that answers to a lot of our problems are there and they’re not necessarily coming from staring at the very problem you have. And I think reading for me, how other online businesses started, is looking for answers by staring at the very same problem that I have. I think that business is business. The fundamentals of any business are more or less, the same. And I’m just attracted and have traditionally been able to get more insights by reading about things other than the very sort of direct application of what I do. And even the insight of starting the company or how I’ve marketed the business over the years did not come from reading about how other online businesses do it.
I’m not saying that I exclusively or that I will never read. I mean, certainly, I’ve read a lot of books about successful companies like Google, Yahoo! and others. But it’s never been my focus. I don’t know. I would say “Gee, I’m running an Internet business.” I wake up every day and say “Gee, I’m running a business.”
Panos: I see. And so you want any business, you want to learn from other business, even if they preceded you. Even if they were John D. Rockefeller’s business which wasn’t around. I guess, a person who died before you were even born. And you know what I was racing to get through in that sentence was that maybe that’s why so many people like the interviews that I do with entrepreneurs who aren’t online. I would say my focus has got to be on online entrepreneurs in these interviews, but whenever I do an interview with a founder who has a restaurant. For some reason, that does exceptionally well. Or a founder who sells food at Whole Foods and built up a successful company that way that does really well.
Andrew: So, that’s food for thought for me. I want to thank you for doing this interview. But before I let you go, I encourage my audience to find ways to say “Thank you” to my guests if they got anything of value from the interview. If they wanted to say “Thank you” to you, what’s the best way for them to do that?
Panos: Yeah. They should just go ahead and e-mail me. Panos, P-A-N-O- S@sonicbids.com, the easiest address on the planet. And they should just go ahead and send a note to me and I’m always happy to respond and always happy to directly address any entrepreneurship-related questions. I’ve benefited a lot by reaching out to others and talking with others and getting others’ insights and others’ mentorship. And it’s important for me that I reciprocate by giving back, as well.
Andrew: I’m honored that you did that here. Thank you so much for sharing and for giving back in this interview. And thank you all for being a part of it. Bye, guys.
Panos: Thank you so much.